David Sheppard, Gleadell’s Managing Director, comments on the wheat market

Markets remain under pressure, as relatively benign US weather dominates price direction. Earlier forecasts of hotter weather entering the US corn belt at the key pollination stage have been replaced with cooler, wetter conditions,  ‘almost ideal’ for crop development.

This has resulted in corn prices trading at their lowest levels since 2010 on the assumption that yield and output could rise, dragging wheat prices down in their wake. Although there has been recent support for wheat, with increased buying activity from China and Egypt and recent crop rating concern over the US spring wheat crop, adequate stocks levels provides little long-term support, especially with the likelihood of increased corn supplies

EU markets have again tested contract lows, reacting to weaker global markets. EU prospects continue to improve as harvest continues, and, with recent Egyptian tenders placing Romanian and Black sea supplies at a hefty discount to French, this could set the tone for a different export picture to last season. Early French cut wheat is reported with proteins falling below 11%. Even though this may improve as the harvest moves north, the market has already built in a protein (export) premium.

In the UK, the release by DEFRA placing the GB wheat area at 1.61mln hectares has done little to stop the bearish sentiment. Based on a 10% rise in yield, this would produce a wheat crop of around 11.8mln t, and whilst this is above earlier projections it would still be 1.5mln t below the 2012 output. However, spot demand remains limited and with signs of increased sellers of old crop supplies, prices have fallen, currently trading at a relatively small premium to new crop values. The dynamics of the balance sheet could alter this season with the news that Ensus has been sold and is likely to re-open some-time late summer/early autumn. The extra demand, if wheat based, will increase the domestic demand for wheat and raise import requirements.

• The US corn market continues to weaken, trading at a near three-year low as favourable weather forecasts boost crop development. 
• Egypt purchases wheat for September shipment. Romanian/Black Sea origin – prices $12-15/t below French offer – no US wheat offered.
• Strategie Grains has raised its estimate of EU-28 soft wheat by 1.9mln t to 133.4mln t.  
• The GB 2013/14 wheat crop area is reported at 1.61mln hectares, down 19% year-on-year due to adverse weather.
• Russia’s National Grain Producers Union sees the 2013 wheat crop at 45-48mln t, below official forecasts.
• The Argentine Agriculture Ministry estimates 2013/14 wheat crop at 12mln t, up from 9mln t this year.